AAII Sentiment Survey: Two out of Five Individual Investors Bearish

Two out of five individual investors are pessimistic about the short-term outlook for stocks. The latest AAII Sentiment Survey also shows a pullback in neutral sentiment and a very slight change in optimism.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 0.1 percentage points to 24.8%. Optimism was last lower on December 12, 2018 (20.9%). This is the 15th time this year that optimism is below its historical average of 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 4.1 percentage points to 35.1%. Even with the drop, neutral sentiment remains above its historical average of 31.0% for the 17th time in 18 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 4.0 percentage points to 40.1%. Pessimism was last higher on January 2, 2019 (42.8%). This is the third consecutive week that bearish sentiment is above its historical average of 30.5%.

Pessimism is now at an unusually high level (more than one standard deviation above its historical average). The breakpoint between typical and unusually high readings is 39.8%. Optimism remains at an unusually low level, below the breakpoint of 28.1%. Historically, unusually low levels of bullish sentiment and unusually high levels of bearish sentiment have been followed by higher-than-median six-month returns for the S&P 500 index.

Many individual investors have been monitoring trade negotiations, particularly between the U.S. and China. We’ve also heard from AAII members who are concerned about a drop in stock prices occurring, and the recent weakness may be playing into their worries. Also having an influence are monetary policy, Washington politics (including President Trump), geopolitics, valuations, corporate earnings and the pace of economic growth.

This week’s AAII Sentiment Survey results:

• Bullish: 24.8%, up 0.1 percentage points
• Neutral: 35.1%, down 4.1 percentage points
• Bearish: 40.1%, up 4.0 percentage points

Historical averages:

• Bullish: 38.5%
• Neutral: 31.0%
• Bearish: 30.5%

Want to weigh in? Take the survey yourself and see results online at www.aaii.com/sentimentsurvey.

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See more Sentiment Survey results.